Swiss Life Rises as Profit Beats Estimates on Premium Growth

Aug 13, 2014 8:32 am ET

Aug. 13 (Bloomberg) -- Swiss Life Holding AG rose the most in almost 18 months in Zurich trading as first-half profit beat analysts’ estimates on higher premium growth and more income from France.

Switzerland’s biggest life insurer rose as much as 7.6 percent, the largest intraday increase since February 2013, after reporting net income of 484 million Swiss francs ($533 million), above the 456 million-franc average estimate of seven analysts surveyed by Bloomberg.

Swiss Life is seeking to bolster profit by cutting costs and boosting sales in its home market and France as low interest rates curb investment returns. Led by Chief Executive Officer Patrick Frost since July 1, the insurer agreed to buy German real estate asset-manager Corpus Sireo to accelerate an expansion in money management.

“The company benefited from good new business at strong margins,” Daniel Bischof, a Zurich-based analyst with Helvea who has a buy rating on the stock, wrote in a note to investors. The earnings were driven by France and the international unit, and partly offset by Switzerland, he said.

The shares jumped 6.9 percent to 225.60 francs by 2:15 p.m. in Zurich, valuing the company at 7.2 billion francs. The gain led the 32-company Bloomberg Europe 500 Insurance Index, which increased 0.5 percent.

Swiss Life, which targets a new business margin of more than 1.5 percent, reported the measure increased to 2.4 percent in the first half from 2 percent a year earlier.

On Track

Gross written premiums in Switzerland, Swiss Life’s biggest unit, rose 12 percent to 6.6 billion francs, driven by the occupational benefits business. Total premium grew 5 percent to 10.8 billion francs.

In France,operating profit rose 26 percent to 118 million francs and premiums increased 3.3 percent to 2.42 billion francs. The international unit, which sells life insurance to high-net-worth-individuals, increased operating profit to 18 million francs.

“These better-than-expected results appear to confirm that Swiss Life is on track to achieve its plans,” Peter Casanova, a Zurich-based analyst with Kepler Cheuvreux who has a buy rating on the stock, wrote in a note to investors. “Growth was driven by domestic group life, the French activities and asset management.”

Chief Financial Officer Thomas Buess told reporters in Zurich today that the company has already achieved 85 percent of its targeted cost cuts of as much as 160 million francs by next year and further strengthened reserves. The group will present new targets next year.

Largest Acquisition

Swiss Life Asset Managers increased operating profit by 4.1 percent to 74 million francs, while assets under management for external customers including pension funds expanded by 2.2 billion francs to 30.3 billion francs, exceeding a target for next year of 30 billion francs.

Operating profit for the Swiss business dropped about 14 percent to 407 million francs as the year-earlier result was buoyed by a 60 million-franc gain from the application of new accounting standards for valuing real estate portfolios.

Swiss Life agreed to buy the Cologne-based Corpus Sireo from German savings banks Sparkasse KoelnBonn, Stadtsparkasse Duesseldorf and Frankfurter Sparkasse for 210 million euros ($281 million). The deal is expected to close in the second half, the company said in a statement today.

“Swiss Life will become a leading real estate asset manager not just in Switzerland and France but also now in Germany,” said CEO Frost, 46. Higher fee income and a “good investment result” pushed earnings higher, he said.

The purchase is the largest by Swiss Life in asset management, according to Frost. Corpus Sireo, which employs 550, manages about 16 billion euros of real-estate assets and generates revenue of about 160 million euros, Swiss Life said.